~ Information for Real Estate Buy-Sell-Invest in Ontario, Canada

Two Big Six banks hike benchmark rates by Approximately 45 BPS, Despite BOC holding its rate.

Two of Canada’s biggest banks are raising their benchmark rates for five-year, fixed-rate mortgages.

TD says as of Wednesday it increased its posted rate for five-year fixed mortgages to 5.59 per cent from 5.14 per cent.

Mortgage planner and rate comparison website founder Robert McLister says the increase is “unusual”as the benchmark rate hasn’t seen a jump of 45 basis points or more since March 2010.

TD spokeswoman Julie Bellissimo says a number of factors are considered when determining rates including the competitive landscape, the cost of lending and managing risk.

Meanwhile, Royal Bank spokesman AJ Goodman says the lender plans to raise its posted rate for a five-year fixed mortgage on Monday to 5.34 per cent compared with the 5.14 per cent currently posted.

McLister says the actual rates banks offer to borrowers are not seeing an increase, but notes the Bank of Canada uses the posted rates at the big banks to calculate the rate used in stress tests to determine whether homebuyers qualify for loans.

A cautious Bank of Canada kept its key interest rate on hold Wednesday as it bought itself more time to monitor mounting trade-related uncertainties out of the United States.

Many experts now believe the central bank will likely wait until the second half of the year before raising the rate again. Some say the next hike might not come until 2019 and at least one economist said Wednesday that, depending how things evolve, the bank could even lower the rate this year.

The Bank of Canada kept its key interest rate target on hold as it pointed to a climate of broadening, important unknowns around trade.

In explaining its decision to maintain its benchmark rate at 1.25 per cent, the central bank notes that recent trade policy developments are a key source of uncertainty for the Canadian and global outlooks.

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U.S. President Donald Trump recently added threats of steel and aluminum tariffs to an already uncertain context for Canada that includes concerns over NAFTA’s renegotiation and competitiveness following tax-cut announcements south of the border.

The Bank of Canada notes fourth-quarter growth was weaker than expected, largely due to higher imports, and that it’s still assessing impacts on housing markets from new policies, including mortgage rules.

But it says global growth continues to be solid and broad-based, the economy is running near capacity, inflation is close to target and wage growth has improved, although still remains below where many expect it should be.

Governor Stephen Poloz was widely expected to hold off moving the rate because of weaker economic numbers in recent weeks and the expanding trade uncertainty.

Poloz has introduced three rate hikes since last summer, including an increase in January. The moves came in response to an impressive economic run for Canada that began in late 2016.

In the statement Wednesday, the bank reiterated it expects more hikes to be necessary over time, but that the governing council will remain cautious when considering future decisions.

They will continue to be guided by incoming data, such as the economy’s sensitivity to higher rates, the evolution of economic capacity and changes to wage growth and inflation, it said.

Canada’s major banks have been quick to react to the Bank of Canada’s decision to raise interest rates to 1.25%.

CIBC, RBC, Scotiabank and TD were among the first lenders to increase their prime lending rates by 25 basis points to 3.45%; the new rates take effect from today (Jan 18,2018).

The BoC rate hike was widely expected but what happens next is the burning question.

Although BoC governor Stephen Poloz painted a rosy picture of the Canadian economy at the end of 2017, his speech Wednesday noted that growth is forecast to slow to 2.2% this year and 1.6% in 2019, compared to the forecast 3% growth in 2017.

NAFTA also presents a challenge to the economy and the governor sounded a cautious tone over its uncertainty.

Governor Poloz said that while interest rates would need to rise over time, the Bank would need to provide some continued “monetary policy accommodation” to keep inflation in check and keep the economy operating close to its potential.

So when might those increases come?

CIBC Economics chief economist Avery Shenfeld says one more increase is likely this year – he’s forecasting early in the third quarter – with two further increases (50 basis points) in 2019.

TD’s senior economist Brian DePratto says that July is penciled in for the next increase but notes that data may present a case for that to be moved forward or pushed back.

The Bank of Canada raised its key interest rate by a quarter of a point to 1.25% on Wednesday January 17, 2018.

Effective Wednesday January 17, 2018, the prime rate at the five banks will rise to 3.45 per cent from 3.20 per cent, matching the 0.25 percentage point increase to the Bank of Canada’s overnight rate.

A bank’s prime interest rate gets factored into a variety of loans, from variable-rate mortgages to lines of credit. Bank customers with loans based on the prime rate will see an immediate increase in their interest / mortgage payments.

Homes in the Greater Toronto Area were selling for an average $822,681 in 2017, up 12.7% from the previous year.

The tight market put upward pressure on prices at the start of the year while the latter two thirds saw fewer sales and increased listings, helping to moderate price increases.

Toronto Real Estate Board members sold 92,394 homes through the MLS last year, down 18.3% compared to 2016 which was a record year. Provincial policy had a noticeable impact on the market.

“Much of the sales volatility in 2017 was brought about by government policy decisions,” said TREB president.

He added that research, including TREB’s own, showed that foreign home buying was not a major driver of sales in the GTA. But the Ontario Fair Housing Plan (FHP) had a psychological impact on the market.

In the fourth quarter though, the FHP’s influence weakened and sales increased following two quarterly declines. This was in part due to the impending OFSI mortgage underwriting rule changes.

“Looking forward, government policy could continue to influence consumer behavior in 2018, as changes to federal mortgage lending guidelines come into effect,” said TREB Officials

The Canadian Real Estate Association says it has cut its home sales forecast for next year due to the impact of tighter mortgage regulations taking effect in the new year, which will erode affordability.

The association representing real estate agents across the country also downgraded projections for 2017.

It now expects national sales activity this year to decline by four per cent to 513,900 units this year due to weak activity in Ontario, after the province in April announced measures to cool the market.

However, it says the national average price of a home is still expected to rise to $510,400, up 4.2 per cent compared to 2016.

CREA is now forecasting a 5.3 per cent drop in national sales to 486,600 units next year. That new estimate shaves about 8,500 sales from its previous 2018 forecast.

The national home price is expected to slip by 1.4 per cent in 2018 to $503,100.

Still, the November figures show the number of homes sold through its MLS system rose by 3.9 per cent compared with October, led by a 16 per cent sales spike in the Greater Toronto Area.

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The Bank of Canada stuck with its trend-setting interest rate Wednesday ,but it offered fresh, yet cautious, warnings to Canadians that increases are likely on the way.

The central bank has now left the rate locked at one per cent for two straight policy announcements after the strengthening economy prompted it to raise it twice in the summer.

In announcing the decision, the bank pointed to several recent positives that could support higher rates in the coming months. They included encouraging job and wage growth, sturdy business investment and the resilience of consumer spending despite higher borrowing costs and Canadians’ heavy debt loads.

On top of that, there’s increasing evidence in the economic data that the benefits from government infrastructure investments have begun to work their way through the economy, the bank said.

But on the other hand, the bank noted exports have slipped more than expected in recent months after a powerful start to the year, although it continues to predict trade growth to pick up due to rising foreign demand.

It also said the international outlook continues to face considerable uncertainty mostly because of geopolitical- and trade-related factors.

“While higher interest rates will likely be required over time, (the bank’s) governing council will continue to be cautious,” the bank said in a statement Wednesday that accompanied its decision.

It will be “guided by incoming data in assessing the economy’s sensitivity to interest rates, the evolution of economic capacity and the dynamics of both wage growth and inflation.”

The bank said inflation, a key factor in its rate decisions, has been slightly higher than anticipated and could stay that way in the short term because of temporary factors like stronger gasoline prices. Core inflation, which measures underlying inflation by omitting volatile items like gas, has continued to inch upwards.

Governor Stephen Poloz raised rates in July and September in response to an impressive economic run that began in late 2016. The hikes took back the two rate cuts he introduced in 2015 to help cushion, and stimulate, the economy from the collapse in oil prices.

From here, the bank must assess how to proceed with the interest rate while taking into consideration that Canadian households have amassed high levels of debt and the presence of still-hot housing markets in areas like Toronto and Vancouver.

Last month, the Bank of Canada flagged the steady climb of household debt and these real estate markets as the financial system’s top vulnerabilities.

The bank’s statement Wednesday said recent economic indicators have been in line with its October forecast, which projected a moderation following the country’s exceptional growth in the first half of 2017.

The document contained a few differences compared with the statement that accompanied its last rate announcement in October.

This time, the bank once again noted the unknowns over the future of trade policy, however, it did not specifically mention the ongoing renegotiation of the North American Free Trade Agreement.

The recent downturn in Toronto's real estate market, brought on after Ontario introduced measures this spring including a foreign buyers' tax, is expected to be brief, the federal housing agency said Wednesday.

Property prices in the city which fell from an average of $919,589 in April to $793,915 last month, according to data from the Toronto Real Estate Board should pick up again due to supply constraints and a stronger economy, Canada Mortgage and Housing Corp. said.

"The response we're seeing in the Toronto market seems almost emotional and a knee-jerk reaction to some of the changes, which suggests that these impacts will be short-lived,'' Dana Senagama, CMHC's principal market analyst for Toronto, said during a conference call to discuss the agency's latest housing market assessment.

The provincial government's measures, which were retroactive to April 21, include a 15 per cent tax on foreign buyers in the Greater Golden Horseshoe region, expanded rent controls and legislation allowing Toronto and other cities to tax vacant homes.

"If job creation continues in Toronto ? and the economy continues to fuel the housing demand, we can expect some of the pressures on house prices in Toronto to resume,'' said Bob Dugan, CMHC's chief economist.

Like Toronto, Vancouver also experienced a real estate slowdown following the implementation of a tax on foreign buyers a year ago. But there have been signs this year that the city's housing market is heating up again.

In its latest quarterly house price survey released two weeks ago, Royal LePage said home sales in Vancouver began to recover in the April-to-June period after the tax “bruised consumer confidence.'' The realtor reported in April that sales in Vancouver's housing market jumped by almost 50 per cent on a month-over-month basis.

CMHC, in its latest housing market assessment released Wednesday, kept its overall risk rating for the national housing market at strong. The quarterly report, which is based on data from the first three months of this year, precedes the Ontario government housing rules.

New protections for condo owners and rules for managers and directors in Ontario are taking effect this fall.

Government and Consumer Services Minister Tracy MacCharles says more than one in 10 people in the province live in a condo and more than half of the new homes under construction are condos.

Starting this fall, new rules will make it easier for condo owners to participate in owners' meetings and will make it easier for them to access records of their condo corporation.

Directors will have to disclose whether they are owners or occupiers of units in the building or if they have interests in contracts involving the corporation, which MacCharles says will improve governance and address conflicts of interest.

Directors will also have to undergo training and there will be mandatory education requirements for condo managers applying for a general licence.

Two new administrative bodies will launch this fall :-the Condominium Authority of Ontario will provide education about condo owner rights and responsibilities and will manage the tribunal that resolves disputes about access to records, and -the Condominium Management Regulatory Authority of Ontario will regulate and licence condo managers.